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Securities fraud and Texas state common law fraud claims brought by two major investors in Alta Mesa Resources will be heading to trial following a decision by U.S. District Judge George C. Hanks, Jr. denying the bulk of the defendants’ summary judgment motions and leaving the vast majority of claims intact. RKS represents the direct action plaintiffs in two federal securities fraud lawsuits, in the United States District Court for the Southern District of Texas, arising out of misstatements made in connection with the 2018 de-SPAC transaction whereby Silver Run Acquisition Corporation II, a SPAC sponsored by Riverstone Holdings, LLC, acquired the upstream exploration and production company, Alta Mesa Holdings, and the related midstream entity Kingfisher Midstream LLC. The combined entity, Alta Mesa Resources, Inc., filed for Chapter 11 bankruptcy in September 2019, less than 18 months after the de-SPAC transaction, following a series of disclosures revealing, among other things, that its production projections provided to investors greatly overstated the oil it could economically recover from its Oklahoma acreage and the revenues Kingfisher could have reasonably expected to generate through its midstream business. RKS’s clients, the first and third largest investors in the SPAC, suffered significant losses as the truth was revealed. RKS brought direct actions on their behalf asserting both federal and state law fraud claims.
Judge Hanks’s decision largely leaves RKS’s clients’ claims for trial, including claims against the SPAC’s sponsor, Riverstone, Alta Mesa’s CEO, Harlan Chapelle, its board chairman and Riverstone partner, James Hackett, and several other individuals and entities. Given that the case involves a SPAC, it is notable that the SPAC sponsor, Riverstone, as well as HPS and Bayour City Energy, which had involvement with the pre-de-SPAC operating companies, will be defendants at trial. While sending the vast majority of claims to trial, Judge Hanks dismissed claims arising from certain statements made in Alta Mesa’s post-de-SPAC March 2018 Form 10-K. The Court also left intact claims against seven individual director and officer defendants and five entities involved in the transaction. The court also denied summary judgment as to the state law claims, and denied several motions to exclude plaintiffs’ experts from trial.
RKS is pleased that the court determined its clients’ claims are supported by sufficient evidence to proceed to trial and looks forward to presenting the cases to a jury and recovering its clients’ losses.